Rosy picture but…

The Philippine peso appreciated back to the P50: US $1 level on Monday, posting a gain of 16 centavos to close at P50.93: $1 from last Friday’s trading finish of P51.09: $1. The peso continued to show strength on the first trading day of the year. For the entire 2019, it posted an average P50.60: $1. The strength of the peso reflects the “stellar performance” of the Philippine economy in 2019.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno rattled off these statistics during our weekly Tuesday Club breakfast meeting at Edsa Shangri-La in Ortigas. A visibly elated BSP Governor reported yesterday to us the country’s foreign exchange buffer, in fact, reached a record level of $87.86 billion in 2019. Or, this is 10.9 percent higher than the $79.19 billion recorded in 2018 amid strong foreign exchange inflows, Diokno pointed out.          

The BSP has been building up our foreign exchange buffer – collectively called as gross international receipts (GIR) – to help the country survive external shocks. The GIR is the sum of all foreign exchange flowing into the country. According to Diokno, about 30% of the GIR is accounted for by the dollars and other foreign exchange remittances of our overseas Filipino workers (OFWs) employed all over the world.

Next biggest chunk of the GIR comes from the “robust” receipts of about $30 billion or so of the business process outsourcing (BPOs). Inflows from foreign direct investment (FDI) remain steady and added $8 billion. And “surprisingly,” Diokno noted, tourism receipts contributed a hefty amount to the GIR. 

As the country’s chief monetary policy-maker, the BSP uses the GIR to buy or sell dollars if it deems necessary to prevent sharp depreciation or appreciation of the peso. It also serves as buffer to ensure that the Philippines would not run out of foreign exchange that it could use to pay for imported goods and services, or maturing obligations in case of external shocks like the looming Middle East (ME) crisis.

The inflows, he explained, were partly offset by outflows representing payments made by the national government on its debt obligations in dollars and other foreign-currency denominated loans. But this should not cause any worry, he reassured us, because the current GIR level is also equivalent to 5.5 times the country’s short-term external debts based on original maturity and 4.3 times based on residual maturity.

More importantly, the BSP chief stressed, the country’s GIR level is equivalent to 7.7 months’ worth of imports of goods, like the crude oil requirements that we buy mostly from ME countries. The upticks in the crude oil prices in the world market as a direct result of the renewed hostilities in the US drone attacks against Islamic military leaders in Iran and Iraq are still within forecast targets of the global economic experts, he added.

Thus, the BSP Governor confidently assuaged the public on growing fears and concerns in the looming new ME crisis: “Don’t panic.”

In his brief address yesterday at the Tuesday Club, Diokno credited Congress for passing into law last year the amendments to the BSP Charter to which he attributed the strengthening of the country’s international reserves, and the law regulating the organization of Islamic banks.

“These laws further strengthen the BSP’s capability to respond to the needs of a fast-growing economy in a rapidly changing global financial environment,” Diokno pointed out.

And also for the first time since the BSP was established, Diokno proudly disclosed that the country’s central bank declared “the highest dividends” remitted yesterday to the national government amounting to P17.5 billion. From the Tuesday Club, Diokno proceeded later to Malacañang Palace where he officially informed President Rodrigo Duterte the BSP remittance to the National Treasury.

This was a day after President Duterte jokingly quipped he will even “rob the Central Bank” just to raise funds if the need for emergency evacuation of our OFWs arises to get them out of harm’s way in the event of another full-blown war in the ME. The Chief Executive told this to his audience at the ceremonial signing into law of the 2020 national budget at Malacañang Palace with leaders and members of the 18th Congress along with key Cabinet members led by Finance Secretary Carlos Dominguez and Department of Budget and Management (DBM) Secretary William Avisado.

 Incidentally, Diokno first served as the DBM Secretary of President Duterte before he got appointed as BSP Governor in March last year. Diokno is serving six of the seven-year unexpired term of the late BSP Governor Nestor Espenilla.

It was also in that same speech where President Duterte mentioned the “bragging” by Finance Sec. Dominguez about the national government’s having so much money available at his disposal. Thus, the President asked the leaders of the 18th Congress to consider holding special sessions to grant him authority to use available “standby funds” in case of a full-blown emergency evacuation of our OFWs and their repatriation back to our country.

“Marami tayo talagang pera,” Diokno concurred. And it is not only the BSP enjoying such healthy financial condition but Diokno takes pride that the country’s entire banking system stands in very much solid grounds. 

The only argument we had with Diokno was on the issue of inflation while market prices of red onions and finger chilis soared. The BSP chief cited our country’s inflation rate remained low and within target from 6.7% in 2018 down to a “record low” of 0.8% in September and October last year. “Can you imagine how many more would have been lifted from poverty had the inflation rates been tamer in 2018?” Diokno rhetorically asked.

Hopefully, with the Agriculture Department now headed by Secretary William Dar, Diokno believes the country’s agriculture will rebound from the doldrums and improve production of rice and our other basic staple food. Hopefully, the rosy picture of our country’s economy will eventually uplift the lives of all Filipinos.